CRE Looks at Behavioral Health

The use of mental health services in the U.S. has greatly expanded since the onset of the Covid pandemic. A research letter in the Journal of the American Medical Association (JAMA) Health Forum presented research into data from 1,554,895 mental health service claims. “The average spending rate was $3,547,424 vs $2,308,247 per 10,000 beneficiaries per month in the post-acute phase vs the pre-pandemic phase (a 53.7% increase),” the research said.

Telehealth visits increased by 1019.3% (about ten-fold). But in-person visits increased 2.2% each month, growing to 79.9% of pre-pandemic levels. Overall, mental health utilization was 38.8% higher than before the pandemic.

Whether in-person or using telehealth, there’s a need for space, and that’s become a growing interest in healthcare commercial real estate.

“Behavioral health issues have obviously skyrocketed,” says Colliers National Director of Healthcare, U.S. Shawn Janus. “The need for behavioral health services has been growing. This is something that exploded on the scene, and you don’t have the supply of professionals to deal with it.”

The growth of telehealth has made sense. “Out of all the health providers in the space, telehealth has had the most stickiness in this area,” Janus says. But all use can rely on remote connections. “You can have some of that over the phone. There are times you’ll have to be face-to-face. As it relates to the developers, the investors, from the provider side recognizing there’s a telehealth provision where it works up to a point, but we see providers building more and more in-patient and outpatient centers.”

The need for space also faces some significant hurdles. “As the lenders were talking about it, they understand the need, but they don’t understand the space and won’t lend into it,” Janus says. It’s not baseline unwillingness so much as a lack that lenders have of track record and understanding how to underwrite it. In-patient treatment can run a week to a month or more with little to predict how a case will go. The grasp of dynamics in telehealth and to what degree a provider might have to see someone in the office is even looser.

“You’re seeing several different conversions that are happening,” he says. Providers, hospitals, clinics, and even non-profit agencies are involved in the discussions. “Those folks are being proactive for having facilities for inpatient and outpatient care, but it’s not a panacea. The third party has to figure out how things work before you can find lenders.”